Firms warned to avoid ‘smart phone’ tax

Posted 5th November 2010

With the ability to reply to e-mail over your cornflakes, hold conference calls from the car, and check the Nasdaq before bedtime, they have quickly become the phones of choice for many business people.

But with so many uses, firms who provide iPhones and Blackberrys to their employees are being advised to avoid a financial headache as the taxman clamps down on personal use of the technology.

Carol Watters, tax manager at Moore and Smalley Chartered Accountants and Business Advisors, says HM Revenue and Customs (HMRC) has begun to pay more scrutiny to employers’ use of Personal Digital Assistants (PDAs) and Smart Phones as they are known.

At present, businesses benefit from a special tax exemption for mobile telephone, but this does not automatically cover phones that provide more than calls and text messages. According to Carol, private use of PDAs and Smart Phones that exceeds HMRC’s view of ‘incidental’ can trigger a tax cost to the employer.

Carol, who advises employers across the region on company tax matters, said: “These devices, with their many applications, including internet news, personal organisers, satellite navigation, and electronic games, may not fall under the tax exemption if they are being accessed for personal use.

“HMRC are including in their checklists a query about mobile telephones provided by employers to staff. As most companies are issuing Blackberrys and iPhones to staff, this issue should be addressed and steps taken to either enforce business use only or consider adding them as an employee benefit to P11D forms.”

P11Ds are used to report benefits provided and expense payments made to employees by employers that are not put through the company payroll. The employees are also given a copy of the P11D should they need it for a self-assessment tax return.